Harrahs Entertainment Reports Third-Quarter,

23rd Oct 2003

PRNewswire-FirstCall LAS VEGAS Oct. 22 :

Harrah`s Entertainment, Inc. today reported record third-quarter revenues
of $1.14 billion, up 2.2 percent from revenues of $1.11 billion in the
2002 third quarter.
Property Earnings Before Interest, Taxes, Depreciation and Amortization
(Property EBITDA) declined 3.4 percent to $316.5 million from Property
EBITDA of $327.7 million in the year-earlier quarter. Third-quarter
Adjusted Earnings Per Share was a record 93 cents, up 2.2 percent from
2002`s third- quarter Adjusted EPS of 91 cents.

Property EBITDA and Adjusted EPS are not Generally Accepted Accounting
Principles (GAAP) measurements but are commonly used in the gaming
industry as measures of performance and as a basis for valuation of gaming
companies. In addition, analysts` per-share earnings estimates are
comparable to Adjusted EPS. Reconciliations of Adjusted EPS to GAAP EPS
and Property EBITDA to income from operations are attached to this release.

Third-quarter income from operations declined 4.3 percent to $217.8
million from $227.7 million in the 2002 third quarter. Third-quarter net
income was $99.5 million, down 1.5 percent from $101.0 million in the
year-ago period. Third-quarter 2003 diluted earnings per share was 90
cents, up 1.1 percent from diluted earnings per share of 89 cents in the
year-earlier quarter.
Cross-market play—gaming by customers at Harrah`s properties other than
their “home” casinos—rose 15.0 percent in the 2003 third quarter from
the year-earlier period. Tracked play—gaming by customers using the
company`s Total Rewards player cards—increased 5.6 percent from the
2002 third quarter.

For the first nine months of 2003, revenues rose 6.1 percent to $3.28
billion from $3.09 billion in the year-ago period. Property EBITDA was
$883.7 million, 1.7 percent below the $899.3 million recorded in the first
nine months of 2002. Nine-month Adjusted EPS was $2.42, compared with
Adjusted EPS of $2.43 in the first nine months of 2002.

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Income from operations for the first nine months of 2003 was $591.6
million, down 5.6 percent from $626.4 million in the year-earlier period.
Nine-month net income was $257.2 million, up 41.9 percent from $181.2
million in the first nine months of 2002. In the 2002 first quarter, the
company adopted the provisions of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, and recorded a
$91.2 million impairment charge. Nine-month diluted earnings per share was
$2.33, up 46.5 percent from $1.59 in the first nine months of 2002.

“We continued to face competitive challenges and the impact of higher tax
rates in the North Central Region, but did see encouraging revenue and
market- share gains in Missouri, Indiana and Iowa,” Loveman said. “In
addition, operational changes implemented to preserve profitability at
Harrah`s Joliet resulted in a 0.5 percent decline in system-wide
same-store revenues, the first decline in 19 quarters.

“But our enhanced Total Rewards program continued to produce increased
play from higher-budget customers and we began to see stronger business
from retail customers—Total Rewards cardholders who typically spend up
to $50 per visit,” Loveman said. “Our recent agreement to buy 11,000 new
coinless- capable slot machines from International Game Technology should
accelerate the rollout of our Fast Cash coinless system. By the end of the
quarter, we had installed our Bally-based Fast Cash technology, which is
compatible with games from any manufacturer, on 3,700 slots.”

Among the third-quarter highlights: * Harrah`s board of directors declared
a quarterly cash dividend of 30 cents per share, which represents—on an
annualized basis—more than 40 percent of analysts` consensus estimate
of Harrah`s 2003 net income. * Harrah`s signed a definitive agreement to
acquire Horseshoe Gaming Holding Corp. for $1.45 billion, including
assumption of debt. The acquisition of Horseshoe`s three casinos in
Indiana, Mississippi and Louisiana is expected to close in the first
quarter of 2004. * Moody`s Investors Service, Standard & Poor`s and Fitch
Ratings confirmed the company`s investment-grade credit ratings and stable
outlook following announcement of the Horseshoe acquisition agreement. *
Harrah`s board was named the Top Performing Board of Directors in Gaming
by HVS Executive Search, an international executive recruiting and
compensation consulting firm. * For the third consecutive year, Harrah`s
was named to the Dow Jones Sustainability World Index, a compilation of
more than 300 companies worldwide selected for their responsible
approaches in creating sustainable long-term shareholder value. * Harrah`s
was named one of three finalists for the Partners in Alignment Award,
which recognizes companies that meld technology and business strategy to
benefit shareholders. Judges for the award, presented annually by
Ziff-Davis CIO Insight magazine, called Harrah`s customer relationship
management program “the most comprehensive, integrated IT-enabled business
strategy in business today.” * The company`s Web site,
http://www.harrahs.com/ , was honored by The Customer Respect Group as one
of two that provide the best customer service in the casino industry.

“During the third quarter, we declared the gaming industry`s highest
dividend and entered into agreements for both the largest slot-machine
purchase and biggest acquisition in Harrah`s history, all while remaining
the only casino operator with an investment-grade credit rating,” Loveman
said. “These accomplishments were made possible by a strategy that has
enabled us to build the casino industry`s strongest balance sheet, which
affords us the flexibility to pursue growth opportunities and
simultaneously deliver high returns to shareholders.

“Starting with the first of two major gaming-tax increases in Illinois,
the past five quarters have included a variety of challenges to earnings
growth in the casino industry,” Loveman said. “Yet we have delivered
modest revenue growth and stable earnings despite higher gaming taxes, the
introduction of new competitor facilities in certain markets, a weak
national economy and a war.
“With the economy now showing encouraging signs of recovery, the execution
of our Total Rewards strategy and initiatives such as Fast Cash should
invigorate both the customer experience and our organic growth as 2004
progresses,” he said.

“We are especially pleased with the proposed Horseshoe acquisition, which
is expected to close in next year`s first quarter and should be
immediately accretive to earnings,” Loveman said. “The possibility of
introducing the Horseshoe brand—one of gaming`s strongest—into new
markets is also particularly exciting to us. For the longer term,
significant growth opportunities in the United Kingdom and in existing and
new jurisdictions in the United States hold great promise.
“Finally, the recognition we received for our board of directors, our
approach to building sustainable shareholder value and our
technology-based business strategy are indicative of our leadership
position in the gaming industry,” Loveman said. “For the past five years,
we have focused on developing the geographic breadth, human capital,
technological capabilities and marketing expertise that allow us to
provide players with the individualized service and benefits they desire,
when and where they want them. That strategy, coupled with our
industry-leading financial strength, positions us well for superior
performance as the industry enters a new growth phase.”